Learn How To Profit From The 2021 Cryptocurrency Bullrun Now!
Get 10% Discount Off Your Crypto Trading Commissions Now!
Get Free Bitcoins!
A recent run-down in the dollar index (DXY) stopped midway as investors awaited United States’ jobs data for a guide on the viewpoint for interest rates. Meanwhile, Bitcoin (BTC) moved inversely to the greenback.
DXY rose to its intraday high of 92.195 on Aug. 4, up 0.45% from its July 30 low of 91.782. The move upside took the index back above its 200-day exponential moving average (200-day EMA; the pink tide in the chart below), at 92.001.
The wave was instrumental in protecting the index from aggressive declines in June; it served as support. Meanwhile, a break above the 200-day EMA also prompted traders to test DXY’s descending trendline resistance. Since then, DXY has been fluctuating between the two levels.
The descending trendline is a part of an inverse head and shoulder pattern, as Cointelegraph reported mid-July. As illustrated in the chart above, the setup projects DXY at or above 97 following a successful upside breakout.
Analysts interpret inverse head and shoulders as bullish patterns. In detail, they appear when the price forms three troughs in a row, with the middle one (head) larger than the other two (shoulders). Meanwhile, the troughs hang by a price ceiling—known as the neckline.
A successful breakout above the neckline tends to shift the profit target at a distance equal to the gap between the neckline and the head’s bottom. With DXY checking all the boxes so far, it appears to be looking for a breakout move towards 97.
The latest bounce in the dollar value appeared ahead of key U.S. jobs data.
In detail, DXY has lost some ground against rival fiat currencies in the past two weeks. That is due to warnings from the Federal Reserve Chairman Jerome Powell.
The central banker said last week, after concluding the two-day Federal Open Market Committee (FOMC) meeting, that they might need to keep their stimulus programs in place because of uncertainties in the jobs market.
The tone of the incoming ADP employment survey on Wednesday, therefore, seems critical. First, the docket offers a preview of the private sector’s job growth. It expects to show that the U.S. economy has added about 695K jobs in July, around 0.43% higher than June.
If the prediction is accurate, it may prompt Fed to pursue tapering earlier than anticipated, which could boost the dollar’s value, as noted in the Institute for Supply Management survey earlier this week.
The ADP report would follow up with the non-farm payroll data on Friday.
Bitcoin (BTC) closed in the red for the fourth day in a row on Tuesday as investors preferred to stay on the sidelines against a bouncing dollar and ahead of the said U.S. jobs data dockets.
On Wednesday, the BTC/USD exchange rate reached a seven-day low of $37,509, down 1.11% intraday and 11.96% from its session top of $42,605.
The pair’s drop appeared as regulators attempted to increase their scrutiny on the crypto sector as a whole. That included the U.S. Securities and Exchange Commission’s chair Gary Gensler’s request to Congress that lawmakers grant his agency “additional powers” to protect investors from the “Wild West” crypto markets.
“There’s a great deal of hype and spin about how crypto assets work,” Gensler said at the Aspen Security Forum on Tuesday.
“In many cases, investors aren’t able to get rigorous, balanced and complete information . . . If we don’t address these issues, I worry a lot of people will be hurt.”
Related: Binance banned in Malaysia, given 14 days notice to shut down operations
The statements followed Congress’s proposal to raise $30 billion annually by taxing the regional cryptocurrency industry.
The latest draft of the infrastructure bill includes raising $30B a year from cracking down on #crypto tax evasion. @robtfrank reports on how that could happen: #btc #bitcoin pic.twitter.com/p2YNNuy1gL
— Squawk Box (@SquawkCNBC) August 2, 2021
But the short-term shocks have not deterred analysts from sharing bold upside outlooks for Bitcoin.
On-chain data researcher Willy Woo projected the benchmark crypto at $50,000-$65,000 in the coming sessions, noting that all investor cohorts—big and small—have been accumulating it during the recent drop. Excerpts from his newsletter:
“Strong-handed investors have been buying the accumulation band for 2 months. Presently they are taking the opportunity to buy large quantities below $42k while price action is temporarily held down against a technical resistance band.”
Additionally, Anthony Pompliano, Partner at Pomp Investments, matched the bullish undertones of Woo’s analysis, noting that Bitcoin’s “sound money principles” against the Fed’s pro-inflation monetary policies have made it a better hedge than gold among tech-savvy investors.
“It is too early to state the narrative to be dead factually, but one of my outlier expectations for the 2020s is that gold’s market cap will materially shrink as investors leave the analog store of value for the digital version,” wrote Pompliano in a note to clients.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.